France holds out for a large EU regional budget slice

Paris eyes an extension of €1 billion for 10 French regions that it says are collateral victims of cuts to the EU budget for 2014-2020. EurActiv France reports.

The negotiations over the next multi-annual financial framework, the EU long term budget, have entered the last, critical stage in which member states traditionally throw European spirit out of the window in defence of their national interests.

And Paris is no exception. They were the first to criticise the British allocation, some €3-4 billion annually, and the multiple discounts afforded to Germany, Sweden, the Netherlands and Austria, which left France feeling it may have to make use of the same sort of process.

Overall, the budget scenario sketched out by Council President Herman Van Rompuy makes few concessions to French regions, which fear they are being taken for a ride.

Franco-German discord

A major problem has been identified for transition regions, those areas whose GDP per capita is between 75% and 90% of the European average.

The European Commission originally proposed to offer them a relative feast of €39 billion, which French regions awaited hungrily. The 10 which were eligible were Picardy, Normandy, Nord-Pas-de-Calais, Lorraine, Franche-Comté, Poitou-Charentes, Limousin, Auvergne, Languedoc-Roussillon, and Corsica.

But the total was slashed to €31 billion and their distribution continues to cause tension throughout the EU. Economic progress has seen some areas go above the 75% threshold.

Though richer than before, these territories continue to demand a large allocation, calling for a payment of at least two-thirds of the structural funds they received during the last budget framework, from 2007 to 2013.

Germany strongly supports this kind of regional safety net, which benefits its eastern states, creating tension with the French, who would drop the bonus in favour of varying the amount of EU subsidies only on the basis of real regional GDP.

Otherwise, some jurisdictions (including some German states, and the regions of Warsaw and Bucharest) may receive a higher proportion of European funds than the French regions, despite having a much higher GDP.

Boost or drift

This accounting trick results in a surreal scenario in which those French regions, having lobbied hard to be awarded the status of transition regions, may have shot themselves in the foot.

Some €4 billion could be assigned to the 10 French regions, no more than they would have received if they had been categorised as rich regions.

Further, the regulatory walls set up between the different categories bar the French state from reallocating the funds where they feel they are needed. The financial boost that they expected could become a further drift in the wrong direction.

Regional presidents are expected to raise the issue with French President François Hollande, though it may be a hard sell. Advisors are working behind the scenes on more favourable scenarios. “If it is impossible to increase the aid intensity for the transition regions category, we do not exclude the idea of a cheque”, a French source told EurActiv.fr.

Officials deem an extension of €1 billion necessary for the 10 regions. Taken in a pincer movement by the irreducible agricultural policy budget and the requests for additional funding for the outermost regions, the plot thickens in the French budget allocation. “So far, we have defended all these subjects at the same level. But we do not know what will be the final hierarchy,” the source said. An answer will likely come in the European Council on 7 and 8 February.

Background

At roughly €130 billion a year, the EU's annual budget is equivalent to around 1% of EU national wealth, or €244 per EU citizen.

The European Commission proposes raising it to an annual €146 billion over the next seven-year period (2014-2020), or €1.025 trillion in total. But austerity-minded national leaders want a much leaner spending plan.

Britain will demand changes to the European Union's regional development funds in budget talks this month, including stripping wealthier nations of access to money intended to help poorer areas, the Sunday Telegraph reported.

The European Parliament's regional committee is holding a vote today (11 July) on legislation that some MEPs say will bring cohesion funds into “a new era” and jump-start negotiations with member states over the EU's next budget for 2014-2020.

Germany's Baden-Württemberg state has taken over the presidency of the ‘four motors’ of Europe, a network of advanced regions in France, Germany, Italy and Spain demanding a bigger slice of EU regional funding to support excellence. EurActiv France reports.

On the eve of an EU summit that could see further political isolation for the United Kingdom, officials made clear that Prime Minister David Cameron would not hesitate to use his veto to freeze the EU's 2014-2020 budget and to preserve the UK rebate.

Negotiations on the role regional funds will play in the EU’s next multi-annual budget are stagnating because talks are taking place in the context of the pre-crisis period, Fabian Zuleeg of the European Policy Centre told EurActiv in an interview.

Germany and six other countries have co-sponsored a call to freeze the EU's next seven-year budget for the period 2014-2020, according to a document obtained by EurActiv.de. But France remains undecided for now as the new Socialist government has yet to take a definitive stance on the issue.